Apple is likely to post better profit margins in its June quarter due to lower-than-expected component prices.

In a research note, Shaw Wu, an analyst at Sterne Agee, raised his estimates for Apple's fiscal third quarter. Wu now sees Apple earning $5.95 a share on revenue of $24.6 billion. Wall Street is expecting profits of $5.70 a share on revenue of $24.7 billion.

Why is Wu so far ahead of consensus earnings estimates? Cheaper memory and display pricing. As a result of better pricing, Apple is expected to report gross margins of 39.8 percent in the third quarter compared to 38.96 percent among other analysts.

Wu said:

Since we raised estimates in late May due to our checks of better iPad component availability and yields, we have picked up that overall component trends continue to improve (memory, NAND, and displays) through July, which has helped make pricing more favorable and we believe will benefit Apple, which has proven in the past to be among the most adept in taking advantage of lower pricing. This is the opposite of what we saw earlier this year due to the unfortunate events in Japan where component pricing is now more a tailwind as opposed to headwind.

Wu is ahead of what is likely to be a bevy of bullish analyst updates ahead of Apple's quarterly report. Demand for Apple's iPad and a continued international rollout of the iPhone will fuel results. Wu is expecting Apple to move 6.8 million iPads, 17 million iPhones, 3.9 million Macs and 8.3 million iPods in the fiscal third quarter.